July housing statistics for Southwest California including Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar & Canyon Lake. Unit sales, median price, sales by price point and demand.

1. We Don’t Do Normal Anymore.
One of the problems we run into in this business is trying to make sense of numbers
that are, at times, nonsensical. Yet we’re all addicted to the numbers. We anxiously
await the release of the latest numbers. We rely on these numbers to guide us, to dictate
our future plans, to build our budgets around and to dictate our own purchases.
And we usually rely on the pundits and prognosticators who provide those numbers to
tell us what they mean. Are they good numbers or do they say one thing while meaning
something contrary? How accurate are they, how applicable are they and does the
prognosticator have an agenda behind the commentary?
For example, you might have read recently that housing sales dropped 27% in July in
Denver, 42% in Minneapolis, 45% in Milwaukee, and 21% in California. After
‘plummeting’ in June, they ‘plunged’ again in July supposedly due to expiration of the
homebuyer tax credit. Except we already know our local sales didn’t plummet in June,
nor did they plunge in July. Our sales did drop about 16% across the region in July but
only after posting an 8% hike in June. Even with that drop sales were up 19% from
January. The national numbers are not applicable.
Median prices were up 3% region-wide in July over June and up exactly $55 per home
over January. Prices have fluctuated within a $17,000 range since the first of the year,
up a little one month, down a little the next. That trend extends back to the beginning of
last year indicating that our market has achieved some price stability regardless of what
the national market is doing. Temecula’s median price was up 11% over January while
Murrieta improved their median by 5%.
The percent of homes selling across the region is edging down to 60% from the 70% we
enjoyed for the past year, and our inventory levels are pushing 3 months now instead of
2. I’ve included comparative demand charts illustrating this.
But neither of those numbers is particularly distressing. What’s driving them is the
short-sales that make up 50% of our market and are failing at a 70% rate. Behind the
numbers that means the 609 homes active in Murrieta right now is actually less than
400 since statistically 50% are short sales of which 70% won’t sell. If we also back out
the homes over $1 million, which are also selling very slowly, we still have an effective
inventory of less than 2 months and a much higher percentage of actual salable homes
selling. The numbers say one thing – mean something else.
Finally, in an ode to self-fulfilling prophecy, the Washington Post last week had an
excellent article (Shhhh…Don’t Say Recession) on how perception is driving the market.
The more the media reports on ‘the recession’, the more people talk about ‘the recession’,
the more recessionary we become. I applaud our local leaders for recognizing reality and
accentuating the great positives about our area. Maybe that’s one reason we’re bucking
the national trends so consistently.
Of course that’s just my opinion – I could be wrong.

2. These recent graphs from USA Today illustrate some of the more positive trends we are
seeing develop across the housing market. Chart #1 shows that sales of new & existing
homes hit bottom sometime last year and bounced. This is certainly accurate for our
area having hit our trough last June. After the bounce they are forecasting continued,
but slower expansion in housing sales. Some areas have yet to see their bounce.
Chart #2 calls for an end to falling home prices sometime this year followed by roughly
12% appreciation through 2012. That may be a bit optimistic for the national picture
wherein many areas are still experiencing declines. But since we appear to have reached
our bottom in the 4th quarter of 2008, we are ahead of this curve. Depending on
variables, we may exceed this projection over the next couple years.
One of those variable is the number of housing starts. Again Moody's chart #3 is showing
new starts increasing right now and escalating through the next two years. I hope that’s
the case. But while we are seeing some new housing starts locally, the national Home
Builders Association clearly disagrees with this rosy scenario. Their numbers nationally
are still down and declining as builders are unable to obtain financing to acquire
property or fund construction. Those that do are finding it difficult to build a product
that is competitive with the REO bargains that still abound.
If housing construction doesn’t pick up soon, the spike in median prices may be even
more noticeable – especially in areas like ours where demand may again outpace supply
and drive prices higher on the limited product available.
The final chart shows the anticipated drop-off in defaults which they are projecting to
start pretty soon. By most estimates this may be wildly optimistic as the default rate has
shown no sign of abating yet with another round of interest rate resets on the horizon
and increasing strategic defaults. However, the graph is accurate in that once defaults
start to decline, the drop-off will be precipitous returning us to a more normal market
with default rates running at historic norms of around 1%. It’s just the timing that’s in
question.

3. 250
2009-2010 Unit Housing Sales
200
150
100
50
0
3/09 6/09 9/09 12/09 3/10 6/10
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
2009-2010 Median Price
$0
3/09 6/09 9/09 12/09 3/10 6/10
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
Data courtesy of MRMLS & Chicago Title

4. 6
700
0
9 July Demand Chart
600
4
6
500 0 3
3
8
6
5 3
400 2 7
1
8 6
7 2
300 1 2
1 1
9 0
1 5 9
1 5 0 1
1
200 3 2
0
0 9 4 8
8 9
2 5 0 6 6 6 6 6 6 5 6 5 5
1 4 3 2 3 2 4 3
100 4 2 2 5 2 8 0 0 6 6 7 7 7
7 . . . . . .
7 8
1 3 1 6 8 3
0
On Market Pending Closed (Demand) Days on Market % Selling Months Supply
(Supply)
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
4
450 3
1 December 2009 Demand
400
3 ( So we can see where we’ve been)
2
2 2 2
350 0
8 9 9
6 3 9 2
300
4
1 1 1
250 1
8 9
1
7 3
8 5 1
200 4
9 3
150 3
9 8
8 7
5 6 7 7 6 7 6
100 0 5 7 5 5 5 5 9 6
4 8 0 3 7 2 7
7 3 3 2 9 2 9 5
2 2 2 2 3
8 0 5
50 . . . . .
2 2 1 2 5 8
0
On Market Pending Closed (Demand) Days on Market % Selling Months Supply
(Supply)
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

5. July Market Activity by Sales Type
Active Closed Failed In Escrow % Activity
Bank Owned 21% 39% 10% 30% 26%
Short Sales 48% 34% 70% 51% 49%
Standard Sales 31% 27% 20% 19% 26%
Other 1% 1% 2% 1% 1%
60 Day Market Activity by Price Point
Price On 60 Day 60 Day REO Percent
Point Market Close Fail Close Selling
Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar, Canyon Lake
Sun City, Hemet, Winchester, Perris & San Jacinto
$100,000 329 269 192 130 58%
$200,000 1,304 977 716 277 58%
$300,000 1,084 837 474 208 64%
$400,000 388 274 180 42 60%
$500,000 100 43 68 6 39%
$600,000 72 20 31 5 39%
$700,000 52 18 31 4 37%
$800,000 36 2 20 2 9%
$900,000 36 5 4 2 56%
$1,000,000 26 1 13 0 7%
$2,000,000 92 5 33 0 13%
$3,000,000 16 0 5 0 No Sale
$4,000,000 4 0 0 0 No Sale
$5,000,000 2 1 1 0 50%
$10,000,000 4 0 1 0 No Sale
$25,000,000 1 0 0 0 No Sale
TOTAL 3,546 2,452 1,769 676 58%
Data courtesy of StatsforAgents
Resale market only. Report intended to be generally descriptive, not definitive.